Is Sprouts Farmers Stock a Buy, Hold or Sell After a 26% YTD Jump?

Sprouts Farmers Market Inc. SFM has been one of the top performers in the grocery space, posting a 25.7% year-to-date gain. The company continues to benefit from shifting consumer preferences toward healthier food choices, backed by solid fundamentals and evolving strategic initiatives. However, with the stock already on a strong upward trajectory, investors are now faced with a key question: Does SFM still offer upside, or is it time to lock in gains?

SFM has comfortably outpaced the Zacks Food-Natural Foods Products industry’s rise of 14%. Sprouts Farmers’ unmatched scale and operational capabilities have also helped it outperform the broader Retail and Wholesale sector and the S&P 500 index, which posted respective declines of 4.1% and 5.2%.

SFM Stock YTD Performance

Sprouts Farmers has even outperformed its peers, such as Farmer Bros. Co. FARM, Grocery Outlet Holding Corp. GO and Performance Food Group Company PFGC. While shares of Farmer Bros. and Grocery Outlet have declined 20% and 16.2%, respectively, so far this year, shares of Performance Food have risen 6.6%.

Closing yesterday’s trading session at $159.75, shares of Sprouts Farmers are currently trading below the 52-week high of $182 attained on June 3, 2025.

SFM Stock Peer Group Performance

Decoding Potential Tailwinds Behind SFM’s Rally

Sprouts Farmers' commitment to providing fresh produce and health-oriented products aligns with the increasing consumer demand for healthier food options. The overall market for natural and organic food at home, which SFM targets, is estimated to be around $290 billion within the total $1.6 trillion spent on food at home. Its private-label products continue to gain traction, accounting for 24% of total sales, with 300 new items launched last year, fostering customer loyalty.

To strengthen customer relationships, SFM has initiated the rollout of its new loyalty program, which is already showing positive signs. Piloted in 35 stores in late 2024, the program achieved sign-ups and scan rates above internal targets. Sprouts Farmers also began self-distributing fresh meat and seafood through its distribution centers. This move provides greater control, enhances freshness and optimizes existing supply-chain capacity. Roughly 80% of stores are now within 250 miles of a distribution center, leading to reduced total miles driven per store delivery by 7%.

Sprouts Farmers plans to open at least 35 new stores in 2025, targeting approximately 10%-unit growth, supported by a robust pipeline of 120 approved sites and more than 85 signed leases. The company's new small-box store format (23,000 sq ft) is designed for more efficient growth and de-risking expansion. New stores generate $13 million in first-year sales, growing 20-25% over the next four years and achieving cash-on-cash returns in the low to mid-30% range by year five. The company sees "plenty of white space" for potential expansion to 1000-plus stores.

Embracing a multi-channel approach, Sprouts Farmers continues to adapt to shifting consumer shopping habits. Significant investments in digital infrastructure, online ordering and delivery services have enhanced customer accessibility. Strategic collaborations with Uber Eats, DoorDash and Instacart have further strengthened its e-commerce presence. E-commerce now accounts for 15% of total sales, growing 28% year over year in the first quarter of 2025.

What to Expect From Sprouts Farmers in Fiscal 2025?

Sprouts Farmers anticipates 2025 net sales growth between 12% and 14% and comparable store sales growth in the range of 5.5%-7.5%. Management has guided adjusted earnings before interest and taxes between $640 million and $660 million for 2025. The company projects full-year earnings between $4.94 and $5.10 per share, indicating growth from the $3.75 per share reported in 2024.

Here’s How Estimates Stack Up for SFM

Reflecting the positive sentiment around Sprouts Farmers, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for the current and next fiscal years by 7 cents and 6 cents to $5.08 and $5.67 per share, respectively. These estimates indicate expected year-over-year growth rates of 35.5% and 11.5%, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
 

Is the Premium Valuation Justified for SFM Stock?

Sprouts Farmers is currently trading at a premium. However, this elevated valuation is not without merit. With a forward 12-month price-to-sales ratio of 1.69, above the median level of 1.66 observed in the past year, Sprouts Farmers demonstrates its appeal to investors seeking growth opportunities. Moreover, when compared with the industry's forward 12-month P/S ratio of 0.25, Sprouts Farmers’ higher valuation reflects its position as a standout performer in the market.

This premium positioning is especially notable when compared to peers like Farmer Bros.  (with a forward 12-month P/S ratio of 0.09), Grocery Outlet (0.26) and Performance Food Group Company (0.21).

SFM Stock: Buy the Rally or Wait for a Pullback?

Sprouts Farmers has emerged as a standout performer in the grocery space, driven by robust consumer demand for healthier food options and supported by strong operational capabilities. The company’s store expansion, growing private label mix and bullish guidance reflect solid momentum ahead. While the stock’s premium valuation may prompt caution among value-focused investors, it appears to be a function of strong underlying fundamentals and growth visibility. For current investors, staying the course appears justified, while potential investors may view any near-term pullbacks as an opportunity to build a position. SFM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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